For each of the unrelated transactions described below, present the entry(ies) required to record each transaction. 1. Grand Corp. issued $20,000,000 par value 10% convertible bonds at 99. If the bonds had not been convertible, the company’s investment banker estimates they would have been sold at 95. Expenses of issuing the bonds were $70,000. 2. Hoosier Company issued $20,000,000 par value 10% bonds at 98. One detachable stock purchase warrant was issued with each $100 par value bond. At the time of issuance, the warrants were selling for $4. 3. Suppose Sepracor, Inc. called its convertible debt in 2014. Assume the following related to the transaction. The 11%, $10,000,000 par value bonds were converted into 1,000,000 shares of $1 par value common stock on July 1, 2014. On July 1, there was $55,000 of unamortized discount applicable to the bonds, and the company paid an additional $75,000 to the bondholders to induce conversion of all the bonds. The company records the conversion using the book value method.
> At December 31, 2014, Grinkov Corporation had the following account balances. Most of Grinkov’s sales are made on a 2-year installment basis. Indicate how these accounts would be reported in Grinkov’s December 31, 201
> On January 1, 2013, Dagwood Company purchased at par 12% bonds having a maturity value of $300,000. They are dated January 1, 2013, and mature January 1, 2018, with interest receivable December 31 of each year. The bonds are classified in the held-to-mat
> On January 1, 2014, Gottlieb Corporation issued $4,000,000 of 10-year, 8% convertible debentures at 102. Interest is to be paid semiannually on June 30 and December 31. Each $1,000 debenture can be converted into eight shares of Gottlieb Corporation $100
> Matheny Inc. went public 3 years ago. The board of directors will be meeting shortly after the end of the year to decide on a dividend policy. In the past, growth has been financed primarily through the retention of earnings. A stock or a cash dividend h
> You have been engaged to review the financial statements of Gottschalk Corporation. In the course of your examination, you conclude that the bookkeeper hired during the current year is not doing a good job. You notice a number of irregularities as follow
> Presented below are four independent situations. (a) On December 31, 2014, Zarle Inc. sold computer equipment to Daniell Co. and immediately leased it back for 10 years. The sales price of the equipment was $520,000, its carrying amount is $400,000, and
> Under what conditions may a seller who is exposed to continued risks of a high rate of return of the product sold recognize sales transactions as current revenue?
> The following defined pension data of Rydell Corp. apply to the year 2014. Instructions For 2014, prepare a pension worksheet for Rydell Corp. that shows the journal entry for pension expense and the year-end balances in the related pension accounts.
> Jennifer Capriati Corp. has a deferred tax asset account with a balance of $150,000 at the end of 2013 due to a single cumulative temporary difference of $375,000. At the end of 2014, this same temporary difference has increased to a cumulative amount of
> Lazaro Inc. sells goods on the installment basis and uses the installment-sales method. Due to a customer default, Lazaro repossessed merchandise that was originally sold for $800, resulting in a gross profit rate of 40%. At the time of repossession, the
> For the following investments identify whether they are: 1. Trading Securities 2. Available-for-Sale Securities 3. Held-to-Maturity Securities Each case is independent of the other. (a) A bond that will mature in 4 years was bought 1 month ago when the p
> The December 31, 2014, balance sheet of Kepler Corp. is as follows. On March 5, 2015, Kepler Corp. called all of the bonds as of April 30 for the principal plus interest through April 30. By April 30, all bondholders had exercised their conversion to com
> Presented below is the comparative balance sheet for Gilmour Company. Instructions (a) Prepare a comparative balance sheet of Gilmour Company showing the percent each item is of the total assets or total liabilities and stockholders’ eq
> Presented below are data taken from the records of Alee Company. Additional information: 1. Held-to-maturity securities carried at a cost of $43,000 on December 31, 2013, were sold in 2014 for $34,000. The loss (not extraordinary) was incorrectly charged
> The first audit of the books of Bruce Gingrich Company was made for the year ended December 31, 2015. In examining the books, the auditor found that certain items had been overlooked or incorrectly handled in the last 3 years. These items are: 1. At the
> Assume that on January 1, 2014, Elmer’s Restaurants sells a computer system to Liquidity Finance Co. for $680,000 and immediately leases the computer system back. The relevant information is as follows. 1. The computer was carried on Elmer’s books at a v
> Gingrich Importers provides the following pension plan information. Instructions From the data above, compute the actual return on the plan assets for 2014. Fair value of pension plan assets, January 1, 2014 Fair value of pension plan assets, Decembe
> What are the arguments for giving separate accounting recognition to the conversion feature of debentures?
> At the end of 2013, Lucretia McEvil Company has $180,000 of cumulative temporary differences that will result in reporting future taxable amounts as shown on the next page. Tax rates enacted as of the beginning of 2012 are: McEvil’s tax
> Gordeeva Corporation began selling goods on the installment basis on January 1, 2014. During 2014, Gordeeva had installment sales of $150,000; cash collections of $54,000; cost of installment sales of $102,000. Prepare the company’s entries to record ins
> Hillsborough Co. has an available-for-sale investment in the bonds of Schuyler Corp. with a carrying (and fair) value of $70,000. Hillsborough determined that due to poor economic prospects for Schuyler, the bonds have decreased in value to $60,000. It i
> On January 1, 2013, when its $30 par value common stock was selling for $80 per share, Plato Corp. issued $10,000,000 of 8% convertible debentures due in 20 years. The conversion option allowed the holder of each $1,000 bond to convert the bond into five
> Bradburn Corporation was formed 5 years ago through a public subscription of common stock. Daniel Brown, who owns 15% of the common stock, was one of the organizers of Bradburn and is its current president. The company has been successful, but it current
> Condensed financial data of Pat Metheny Company for 2014 and 2013 are presented below. Additional information: During the year, $70 of common stock was issued in exchange for plant assets. No plant assets were sold in 2014. Instructions Prepare a stateme
> Below is the net income of Anita Ferreri Instrument Co., a private corporation, computed under the three inventory methods using a periodic system. Instructions (Ignore tax considerations.) (a) Assume that in 2015 Ferreri decided to change from the FIFO
> On February 20, 2014, Barbara Brent Inc., purchased a machine for $1,500,000 for the purpose of leasing it. The machine is expected to have a 10-year life, no residual value, and will be depreciated on the straight-line basis. The machine was leased to R
> Andrews Company has five employees participating in its defined benefit pension plan. Expected years of future service for these employees at the beginning of 2014 are as follows. On January 1, 2014, the company amended its pension plan, increasing its p
> The following facts relate to Duncan Corporation. 1. Deferred tax liability, January 1, 2014, $60,000. 2. Deferred tax asset, January 1, 2014, $20,000. 3. Taxable income for 2014, $105,000. 4. Cumulative temporary difference at December 31, 2014, giving
> What are the major types of subsequent events? Indicate how each of the following “subsequent events” would be reported. (a) Collection of a note written off in a prior period. (b) Issuance of a large preferred stock offering. (c) Acquisition of a compan
> Archer Construction Company began work on a $420,000 construction contract in 2014. During 2014, Archer incurred costs of $278,000, billed its customer for $215,000, and collected $175,000. At December 31, 2014, the estimated future costs to complete the
> The following information relates to Starbucks for the year ended October 2, 2011: net income 1,245.7 million; unrealized holding loss of $10.9 million related to available-for-sale securities during the year; accumulated other comprehensive income of $5
> Vargo Company has bonds payable outstanding in the amount of $500,000, and the Premium on Bonds Payable account has a balance of $7,500. Each $1,000 bond is convertible into 20 shares of preferred stock of par value of $50 per share. All bonds are conver
> Cineplex Corporation is a diversified company that operates in five different industries: A, B, C, D, and E. The following information relating to each segment is available for 2015. Sales of segments B and C included intersegment sales of $20,000 and $1
> Data for Brecker Inc. are presented in E23-13. In E23-13 Instructions Prepare a statement of cash flows using the indirect method. BRECKER INC. COMPARATIVE BALANCE SHEET As OF DECEMBER 31, 2014 AND 2013 12/31/14 12/31/13 Cash $ 6,000 $ 7,000 62,000
> Cullen Construction Company, which began operations in 2014, changed from the completed-contract to the percentage-of-completion method of accounting for long-term construction contracts during 2015. For tax purposes, the company employs the completed co
> On January 1, 2014, a machine was purchased for $900,000 by Young Co. The machine is expected to have an 8-year life with no salvage value. It is to be depreciated on a straight-line basis. The machine was leased to St. Leger Inc. on January 1, 2014, at
> The following facts apply to the pension plan of Boudreau Inc. for the year 2014. Instructions Using the preceding data, compute pension expense for the year 2014. As part of your solution, prepare a pension worksheet that shows the journal entry for pen
> At December 31, 2013, Belmont Company had a net deferred tax liability of $375,000. An explanation of the items that compose this balance is as follows. In analyzing the temporary differences, you find that $30,000 of the depreciation temporary differenc
> Guillen, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. Guillen uses the completed-contract method. At December 31, 2014, the balances in certain accounts were Construction in Process $1,715,000; Accounts Receivable $24
> Identify the following items as (1) operating, (2) investing, or (3) financing activities: purchase of land, payment of dividends, cash sales, and purchase of treasury stock.
> Cleveland Company has a stock portfolio valued at $4,000 (available-for-sale). Its cost was $3,300. If the Fair Value Adjustment account has a debit balance of $200, prepare the journal entry at year-end.
> Aubrey Inc. issued $4,000,000 of 10%, 10-year convertible bonds on June 1, 2014, at 98 plus accrued interest. The bonds were dated April 1, 2014, with interest payable April 1 and October 1. Bond discount is amortized semiannually on a straight-line basi
> Peter M. Dell Co. purchased equipment for $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2015, it is determine
> On January 1, 2014, Doug Nelson Co. leased a building to Patrick Wise Inc. The relevant information related to the lease is as follows. 1. The lease arrangement is for 10 years. 2. The leased building cost $4,500,000 and was purchased for cash on January
> Using the information in E20-2, In E20-2 Prepare a pension worksheet inserting January 1, 2014, balances, showing December 31, 2014, balances, and the journal entry recording pension expense. $ 90,000 105,000 10,000 64,000 40,000 640,000 700,000 150
> Felicia Rashad Corporation has pretax financial income (or loss) equal to taxable income (or loss) from 2006 through 2014 as follows. Pretax financial income (loss) and taxable income (loss) were the same for all years since Rashad has been in business.
> Use the information from BE18-7, but assume Turner uses the completed-contract method. In BE18-7 O’Neil, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. O’Neil uses the percentage-of-completion method. At December 31, 2
> Zoop Corporation purchased for $300,000 a 30% interest in Murphy, Inc. This investment enables Zoop to exert significant influence over Murphy. During the year, Murphy earned net income of $180,000 and paid dividends of $60,000. Prepare Zoop’s journal en
> Edna Millay Inc. is a manufacturer of electronic components and accessories with total assets of $20,000,000. Selected financial ratios for Millay and the industry averages for firms of similar size are presented below. Millay is being reviewed by severa
> Define a change in estimate and provide an illustration. When is a change in accounting estimate effected by a change in accounting principle?
> On January 1, 2011, Jackson Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $50,000 salvage value, $800,000 cost Equipment, 12-year estimated useful life
> Laura Leasing Company signs an agreement on January 1, 2014, to lease equipment to Plote Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 5 years with no renewal option. The equipment has an estimate
> The following information is available for the pension plan of Radcliffe Company for the year 2014. Instructions (a) Compute pension expense for the year 2014. (b) Prepare the journal entry to record pension expense and the employer’s c
> The pretax financial income (or loss) figures for Jenny Spangler Company are as follows. Pretax financial income (or loss) and taxable income (loss) were the same for all years involved. Assume a 45% tax rate for 2009 and 2010 and a 40% tax rate for the
> O’Neil, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. O’Neil uses the percentage-of-completion method. At December 31, 2014, the balances in certain accounts were Construction in Process $2,450,000; Accounts Receivable
> Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock as an available for-sale investment for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At yearend, Sherman stock was selling for $34.50 per share. Prepare
> Ferraro, Inc. established a stock-appreciation rights (SAR) program on January 1, 2014, which entitles executives to receive cash at the date of exercise for the difference between the market price of the stock and the pre-established price of $20 on 5,0
> Picasso Company is a wholesale distributor of professional equipment and supplies. The company’s sales have averaged about $900,000 annually for the 3-year period 2012–2014. The firm’s total assets at
> Joy Cunningham Co. purchased a machine on January 1, 2012, for $550,000. At that time, it was estimated that the machine would have a 10-year life and no salvage value. On December 31, 2015, the firm’s accountant found that the entry for depreciation exp
> Morgan Leasing Company signs an agreement on January 1, 2014, to lease equipment to Cole Company. The following information relates to this agreement. 1. The term of the noncancelable lease is 6 years with no renewal option. The equipment has an estimate
> Explain the distinction between a direct-financing lease and a sales-type lease for a lessor.
> Veldre Company provides the following information about its defined benefit pension plan for the year 2014. Instructions Compute the pension expense for the year 2014. $ 90,000 105,000 10,000 64,000 40,000 640,000 700,000 150,000 Service cost Contrib
> Button Company has the following two temporary differences between its income tax expense and income taxes payable. The income tax rate for all years is 40%. Instructions (a) Assuming there were no temporary differences prior to 2014, prepare the journal
> Turner, Inc. began work on a $7,000,000 contract in 2014 to construct an office building. During 2014, Turner, Inc. incurred costs of $1,700,000, billed its customers for $1,200,000, and collected $960,000. At December 31, 2014, the estimated future cost
> Fairbanks Corporation purchased 400 shares of Sherman Inc. common stock as an available for-sale investment for $13,200. During the year, Sherman paid a cash dividend of $3.25 per share. At yearend, Sherman stock was selling for $34.50 per share. Prepare
> The 2014 income statement of Wasmeier Corporation showed net income of $480,000 and an extraordinary loss of $120,000. Wasmeier had 100,000 shares of common stock outstanding all year. Prepare Wasmeier’s income statement presentation of earnings per shar
> As loan analyst for Utrillo Bank, you have been presented the following information. Each of these companies has requested a loan of $50,000 for 6 months with no collateral offered. Because your bank has reached its quota for loans of this type, only one
> Presented below are two independent situations. Situation A: Annie Lennox Co. reports revenues of $200,000 and operating expenses of $110,000 in its first year of operations, 2014. Accounts receivable and accounts payable at year-end were $71,000 and $29
> Listed below are various types of accounting changes and errors. ______ 1. Change in a plant asset’s salvage value. ______ 2. Change due to overstatement of inventory. ______ 3. Change from sum-of-the-years’-digits to straight-line method of depreciation
> A lease agreement between Mooney Leasing Company and Rode Company is described in E21-8. In E21-8 Instructions Refer to the data in E21-8 and do the following for the lessor. (a) Compute the amount of the lease receivable at the inception of the lease. (
> For 2014, Sampsell Inc. computed its annual postretirement expense as $240,900. Sampsell’s contribution to the plan during 2014 was $180,000. Prepare Sampsell’s 2014 entry to record postretirement expense.
> The book basis of depreciable assets for Erwin Co. is $900,000, and the tax basis is $700,000 at the end of 2015. The enacted tax rate is 34% for all periods. Determine the amount of deferred taxes to be reported on the balance sheet at the end of 2015.
> Complete the following statements by filling in the blanks. (a) In a period in which a taxable temporary difference reverses, the reversal will cause taxable income to be _______ (less than, greater than) pretax financial income. (b) If a $76,000 balance
> Telephone Sellers Inc. sells prepaid telephone cards to customers. Telephone Sellers then pays the telecommunications company, TeleExpress, for the actual use of its telephone lines. Assume that Telephone Sellers sells $4,000 of prepaid cards in January
> Hendricks Corporation purchased trading investment bonds for $50,000 at par. At December 31, Hendricks received annual interest of $2,000, and the fair value of the bonds was $47,400. Prepare Hendricks’ journal entries for (a) The purchase of the invest
> Bedard Corporation reported net income of $300,000 in 2014 and had 200,000 shares of common stock outstanding throughout the year. Also outstanding all year were 45,000 options to purchase common stock at $10 per share. The average market price of the st
> Carlton Company is involved in four separate industries. The following information is available for each of the four industries. Instructions Determine which of the operating segments are reportable based on the: (a) Revenue test. (b) Operating profit (l
> Data for Krauss Company are presented in E23-5. In E23-5 Krauss’s balance sheet contained the following comparative data at December 31. Instructions Prepare the operating activities section of the statement of cash flows using the indi
> Presented below are the comparative income and retained earnings statements for Denise Habbe Inc. for the years 2014 and 2015. The following additional information is provided: 1. In 2015, Denise Habbe Inc. decided to switch its depreciation method from
> The following facts pertain to a noncancelable lease agreement between Mooney Leasing Company and Rode Company, a lessee. The collectibility of the lease payments is reasonably predictable, and there are no important uncertainties surrounding the costs y
> Manno Corporation has the following information available concerning its postretirement benefit plan for 2014. Compute Manno’s 2014 postretirement expense. $40,000 47,400 26,900 Service cost Interest cost Actual and expected return
> Jansen Corporation shipped $20,000 of merchandise on consignment to Gooch Company. Jansen paid freight costs of $2,000. Gooch Company paid $500 for local advertising, which is reimbursable from Jansen. By year-end, 60% of the merchandise had been sold fo
> What are the three alternative accounting methods available to a seller that is exposed to continued risks of ownership through return of the product?
> Bradley Co. is expanding its operations and is in the process of selecting the method of financing this program. After some investigation, the company determines that it may (1) issue bonds and with the proceeds purchase the needed assets or (2) lease th
> Carow Corporation purchased, as a held-to-maturity investment, $60,000 of the 8%, 5-year bonds of Harrison, Inc. for $65,118, which provides a 6% return. The bonds pay interest semiannually. Prepare Carow’s journal entries for (a) The purchase of the in
> DiCenta Corporation reported net income of $270,000 in 2014 and had 50,000 shares of common stock outstanding throughout the year. Also outstanding all year were 5,000 shares of cumulative preferred stock, each convertible into 2 shares of common. The pr
> For each of the following subsequent (post-balance-sheet) events, indicate whether a company should (a) adjust the financial statements, (b) disclose in notes to the financial statements, or (c) neither adjust nor disclose. ______ 1. Settlement of federa
> Krauss Company’s income statement for the year ended December 31, 2014, contained the following condensed information. Krauss’s balance sheet contained the following comparative data at December 31. Instructions Prepar
> Kathleen Cole Inc. acquired the following assets in January of 2012. The equipment has been depreciated using the sum-of-the-years’-digits method for the first 3 years for financial reporting purposes. In 2015, the company decided to ch
> On January 1, 2014, Bensen Company leased equipment to Flynn Corporation. The following information pertains to this lease. 1. The term of the noncancelable lease is 6 years, with no renewal option. The equipment reverts to the lessor at the termination
> Lahey Corp. has three defined benefit pension plans as follows. How will Lahey report these multiple plans in its financial statements? Projected Benefit Obligation Pension Assets (at Fair Value) Plan X Plan Y Plan Z $600,000 900,000 550,000 $500,000
> Aamodt Music sold CDs to retailers and recorded sales revenue of $700,000. During 2014, retailers returned CDs to Aamodt and were granted credit of $78,000. Past experience indicates that the normal return rate is 15%. Prepare Aamodt’s entries to record
> Use the information from BE17-1 but assume the bonds are purchased as an available-for-sale security. In BE17-2 Garfield Company purchased, as a held-to-maturity investment, $80,000 of the 9%, 5-year bonds of Chester Corporation for $74,086, which provi
> Rockland Corporation earned net income of $300,000 in 2014 and had 100,000 shares of common stock outstanding throughout the year. Also outstanding all year was $800,000 of 10% bonds, which are convertible into 16,000 shares of common. Rockland’s tax rat
> Explain how the conversion feature of convertible debt has a value (a) to the issuer and (b) to the purchaser.
> Madrasah Corporation issued its financial statements for the year ended December 31, 2014, on March 10, 2015. The following events took place early in 2015. (a) On January 10, 10,000 shares of $5 par value common stock were issued at $66 per share. (b) O
> Data for the Vince Gill Company are presented in E23-3. In E23-3 Instructions Prepare the operating activities section of the statement of cash flows using the direct method. VINCE GILL COMPANY INCOME STATEMENT FOR THE YEAR ENDED DECEMBER 31, 2014 Sa
> Presented below are income statements prepared on a LIFO and FIFO basis for Kenseth Company, which started operations on January 1, 2013. The company presently uses the LIFO method of pricing its inventory and has decided to switch to the FIFO method in
> Crosley Company, a machinery dealer, leased a machine to Dexter Corporation on January 1, 2014. The lease is for an 8-year period and requires equal annual payments of $35,013 at the beginning of each year. The first payment is received on January 1, 201
> Norton Co. had the following amounts related to its pension plan in 2014. Determine for 2014: (a) Norton’s other comprehensive income (loss), and (b) Comprehensive income. Net income for 2014 is $26,000; no amortization of gain or los
